On February 20th the PJM Interconnection (regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia) hit a new winter peak load of 143,800 Megawatts. This exceeded the winter record set on January 7th during the 2014 Polar Vortex. Additionally, for the first time ever a winter peak exceeded a prior summer peak (141,402 Mws-June 17, 2014). However, PJM met the demand easily as the system was much better prepared this winter with about 161,000 Mws of resources available as opposed to last year when approximately 40,000 Mws of PJM capacity was not available.
While pricing through this winter’s “polar vortex 2” was not quite as volatile as in 2014 we thought it would be useful to examine the current PJM/ComEd forward curve after this record setting load and volatile spot pricing.
Prior to February 19th when the PJM/ComEd 24-hour day-ahead average was $138.35 per Mwh, it had been 245 days since the 24-hour day average price had been above $50.00. This was attributable to generally mild weather impacting demand and lower fuel (primarily natural gas) prices and increased renewables influencing supply. A review of spot and forward pricing over the last 2 years could lead to the conclusion that PJM/Comed is now a winter peaking market. The 36-month PJM/ComEd forward curve in theabove chart is in fact implying this. The other data set in the chart plots the 9-year monthly day-ahead averages for each month. This larger set of averages presents a historical bi-nodal market with upside risk apparent in winter and summer. In other words, the market is currently pricing in winter risk but not summer or shoulder month risk. There is practically no event risk built into summer or shoulder prices and while the last two summers have been mild, a very warm summer could reveal unexpected load growth and the summer could see some high spot prices. This could be a good time to lock in fixed prices for these periods for most electricity customers.